IOG plc has lowered its production guidance due to planned and unplanned downtime scenarios and possible variation in Southwark first gas timing at its off-onshore Saturn Banks project in the UK Southern North Sea.
PRODUCTION
In the operator’s interim results for the first half of 2022, chief executive Andrew Hockey said that production over H2 2022 (up to 21 August) had been limited to an average of 34.4 mmscf/d by “unexpectedly high and saline produced water”.
“The Blythe and Elgood wells are currently being alternated to assess the water source and inform next steps, and at the time of release we are temporarily producing only from Elgood, at c.20 mmscf/d.
“In that context we have adjusted our 2H 2022 gross production guidance to 30-50 mmscf/d to account for a range of planned and unplanned downtime scenarios as well as potential variation in Southwark first gas timing.”
Blythe and Elgood were brought onstream in mid-March 2022 and recorded gross aggregate production of 34 mmscf/d from first gas to 30 June 2022, at 59% uptime.
FINANCES
For the first six months of 2022, IOG received revenue of £30.2 million (30 June 2021: £nil), split 94% gas and 6% condensate.
EBITDAX was £25.9m (H1 2021: £0.1m) with post-tax profit of £11.4m (H1 2021: £200,000).
The company held unrestricted cash of £12.3mn (31 December 2021: £31.3m).
€100 million senior secured bond maturing September 2024 remains in place, with closing market price of 100.5 (0.5% premium to par) as at 30 June 2022.
OPERATIONS
In H1 2022, IOG signed a new long-term gas sales agreement (GSA) with BP Gas Marketing Ltd (BPGM), covering the Blythe, Elgood, Southwark, Nailsworth and Elland fields up to at least September 2023.
The company said it made further progress towards first gas at Southwark, the third Phase I field, targeted for Q4 2022.
IOG drilled the Southwark A2 (East) well and in Q2 2022 completed the 6km extension of 24″ Saturn Banks pipeline system to the Southwark field.
During H1 2022, IOG’s total reportable incident rate (TRIR) was of 4.8 per 200,000 man hours.
INVESTMENT
Mr Hockey added that the current energy crisis demonstrated the importance of low carbon intensity domestic gas production to delivering secure, affordable and sustainable energy supply.
“Our high-margin Phase I gas production can help to meet this challenge and enable further investment in our next phases of growth.”
OUTLOOK
In July 2022, IOG shut down the Blythe platform for one week for chemical injection modifications.
Drilling resumed on the Southwark A1 (West) production in early Q3 2022 but IOG has experienced “significant delays” to date due to drilling fluid losses, primarily in the Bunter Sandstone formation.
The Southwark subsea, hook-up and commissioning works continue in parallel targeting first gas in Q4 2022.
IOG plans to drill Goddard and Kelham North/Central appraisal wells after Southwark.
Planning and engineering continue for Phase II and the company engages with its partner and regulators.
The company expects to complete by year end, the seismic re-evaluation for the Panther/Grafton area.
IOG also plans to apply for new licences for the 33rd UK Offshore Licensing Round.
The company projected that its 2022 Scope 1 and 2 emissions intensity would be among the lowest in the UK North Sea.
SATURN BANKS
Saturn Banks Phase I involves the Blythe, Elgood and Southwark gas fields.
Phase II comprises the Nailsworth, Goddard and Elland gas discoveries, which are subject to future investment decisions.
The company’s other licences cover the Abbeydale, Panther and Grafton gas discoveries, the Kelham North, Kelham Central, Thornbridge and Thornbridge Deep prospects, and part of the Orrell gas discovery.
IOG operates all its licences which are held 50:50 joint venture with partner CalEnergy Resources (UK) Ltd (CER).